Posted tagged ‘Money Printing’

Some Econ Homework

June 20, 2017

Jean-Baptiste Say And The “Law Of Markets“, by Richard Ebeling, at Say’s ‘Law Of Markets’ states: “A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.”…..As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase.”

You can’t consume what has not been produced. Production creates the ability to consume. The more you produce the more you can consume.

Say: “It is not the abundance of money but the abundance of other products in general that facilitates sales….Money performs no more than the role of a conduit in this double exchange. When the exchanges have been completed, it will be fount that one has paid for products with products….Should a tradesman say, ‘I don not want other commodities for my woolens, I want money,’ there could be little difficulty in convincing him, that his customers cannot pay him money, without having first procured it by the sale of some other  commodities of their own….”

Counterfeiting money creates an exchange of an actual produced good for dollars that are not backed by corresponding production. This is theft. Even if the counterfeiting is done ‘legally’ by The Federal Reserve, it is still an exchange of something for nothing (aka theft).

There are always imbalances with supply and demand in the market, but they are usually corrected rather quickly. Monetary intervention by the Fed creates imbalances that last much longer and are only corrected by stopping the monetary intervention or an eventual bursting of the bubble.

Federal Reserve monetary manipulation has been going on for about a decade. Does anyone know what is real and what is fake in our economy right now? All we can say is there are major imbalances in our economy that will eventually be liquidated, and it won’t be pretty.

“Priming The Pump” Won’t Create Real Wealth, by Frank Shostak, at When a recession happens labor and capital become idle. ‘Experts’ think the way out of the recession is to increase demand for goods and services so these idle labor and capital will become employed once again. Ignoring how the over-supply of labor and capital happened in the first place can lead to the same Government and Fed policy solutions which created the problem in the first place. Idle resources are not the problem. Idle resources are the symptom of the problem. The problem is the initial intervention into the market using the policies of below market interest rates and injecting electronically printing counterfeit money into the economy.

Excerpt from the article: “Commentators are correct in believing that what prevents the expansion of the production and the utilization of idle resources is the lack of credit. There is, however, the need to emphasize that the credit that is lacking is the productive credit – the one that is fully backed by real wealth (real savings). The fact that this type of credit is scarce is the outcome of previous episodes of expansionary monetary mischief by the central bank, which resulted in the diversion of wealth from wealth producers to non – wealth producers.”

“What most commentators advocate is the expansion of credit out of “thin air,” via central bank…. direct monetary injections or via intervention in the money markets to maintain a lower target interest rate……This expansion of unbacked credit not only cannot revitalize the economy but, on the contrary, will set in motion a further weakening of the process of wealth generation.

Fed Officials Can’t See What’s Right In Front Of Them, Jonathan Newman, at Fed officials can’t see the forest for the trees.

Here is an excerpt from the article:”Minnesota District Bank president, Neel Kashkari recently wrote…..the Fed faces a dilemma regarding asset bubbles and whether of not they should be met with raising interest. He summarizes in five points.”

-“It is really hard to spot bubbles with any confidence before they burst.”

-“The fed has limited policy tools to stop a bubble from growing, even if we thought we spotted one.”

-“The costs of making policy mistakes can be very high, so we must proceed with caution.”

-“What we can and must do is ensure that the financial system is strong enough to withstand the inevitable bursting of a bubble.”

-“Monetary policy should be used only as a last resort to address asset prices, because the costs of the economy of such policy response are potentially so large.”

“Then he admits that it is possible artificially low-interest rates increase the probability of asset bubbles forming: “Low rates…could make bubbles more likely to form in the first place.” He laments that there is no economic theory to back this up….”

It is hard to believe that with his myriad of  ‘credentialed ignorance’ he has never heard of the Austrian Business Cycle Theory.  Excerpt from the article:

“For Mises and Hayek, the policy mistake involves any creation of credit out of thin air…….If any central bank increases the money supply through the financial system, it means that borrowers have the privilege of being the first to bid up prices as the new money ripples through the economy.”

“It means that nominal incomes, employment, consumption, the prices of capital goods, and other asset prices will increase. It means that capital will be directed into new, longer, and riskier lines of production, beyond what would have happened at the prevailing levels of real saving. These lines of production will turn out to be unprofitable as the increasing scarcity of capital becomes apparent and the costs of production become prohibitively high. Incomes, employment, consumption, and stock prices plummet as laborers and capital owners seek productive and profitable employment. The bust is made up of all of the necessary corrections for the errors made during the boom. Additional artificial credit will only delay this process and make it more painful when the day comes.

Mr. Kashkari, you said: ” Monetary policy should be used only as a last resort to address asset prices, because the cost to the economy of such policy responses are potentially so large.” Mr. Kashkari, do you know that the Fed monetary policies “of last resort” have been in effect since before 2000? These policies caused the tech and housing bubbles. What have been the costs to the economy after 20 years of these policies? They are incalculable. The only way to stop this waste is to allow interest rates to be set by the market and stop the money printing. This will bring about a recession which will correct all the dislocations of resources, capital and labor that were brought about by these policies. All thought the losses will be high, they won’t come close to the losses that will be incur the longer these monetary policies are allowed to continue.

Related ArticleInterest Rates Set By The Market vs. Interest Rates Set By The Fed, at

Related ArticleReal Savings = True Credit. Printed Savings = False Credit, at

Related ArticleThomas Woods Explains The Austrian Business Cycle, at

Related ArticleThe Fed has Proved The Lefts “Trickle down Straw Man” Doesn’t Work. at


Government: Is It Ever Big Enough? by Prager University

April 26, 2016

Will Government ever stop its intrusion into our lives?

How can the growth of Government be stopped?

Here some excerpts from the video.

“A government powerful enough to give you everything you want, will also necessarily be powerful enough to take away everything you have. Including your freedom. Government power must be limited because the alternative is unlimited Government.

(Modern day) “Liberals believe that if there is a societal problem they believe the best solution is a new Government program. If it fails to achieve its goal, which it invariably does, the solution is a bigger Government program – More – and when does more become enough? The honest answer is NEVER“.


The Constitution was supposed to control the size of government. Since “the Constitution is no threat to our current form of government,” as Joseph Sobran has said, the only way to shrink Government is to get back to sound money. As long as Government can fund itself via The Fed’s electronically printed counterfeit money, there isn’t much that can be done. Cutting the size and scope of government is the real solution to the problem, but we all know that shrinking government is almost impossible because of our political process. No matter who gets in control of congress and/or the presidency, government keeps growing.  In this article by Paul-Martin Foss titled, Sound Money And Fiscal Policy (read here at, he talks about the relationship between the growth of government and a central banks ability to print money. Here are some excerpts from the article.

“Sound money….. is the most important check on government spending. If money is sound, meaning that the government cannot inflate the money supply at will, then government spending will be limited. Remember that governments can fund their operations through three methods: 1.) Taxation; 2.) Bonds, or borrowing; 3.) Inflation.”

“Taxation is self-limiting because at higher tax rates there will be massive tax avoidance and tax revenues will fall, or the government might be voted out or overthrown if people are angry enough. Bonds have to be repaid, which comes from future taxation, so we are back to the self-limiting aspect of tax funding. Bonds also require interest payments, and if a government isn’t creditworthy then the interest payments may make borrowing money prohibitively expensive.”

“This leads us to the third and preferred method, inflation. By creating more money, the government decreases the value of each monetary unit. But it normally does so in a slow enough manner as to be barely perceptible to the average person. And where does this newly-created money go? Why, to the government’s coffers, of course. There it gets spent on wars, welfare, and other boondoggles. In the meantime, the newly-created money causes the prices of goods to increase, driving up the cost of living for the average person. In this way, inflation is a stealth tax. Its effects are just as insidious as direct taxation in that it takes money from citizens and deposits it into government coffers, but it does so in such an imperceptible way that very few people realize that they are being fleeced. That allows governments to spend far more money than they otherwise would be able to by relying on taxes and borrowing alone, which is why governments prefer it.”

Sound money and the Fed are subjects not many people had heard about, let alone understood, until Ron Paul shed light on them during his run for president. More people have to understand the concept of sound money, on the one hand, and how the Federal Reserve produces counterfeit fiat money on the other, if there is any chance of reigning in Leviathan.


Must Reads For The Week 10/23/15

October 24, 2015

A Challenge To The GOP From Bernie Sanders: Put Up Our Shut Up On Capitalism, by Dan Mitchell, at Sanders is correct for wanting reporters to ask Republicans: ‘are you a capitalist’. Socialism is government ownership of the means of production. Sanders and Hillary don’t want socialism. They want government intervention, redistribution and crony socialism. Capitalism is private ownership of the means of production. Republicans candidates think they want capitalism. But what they propose is varying degrees of government intervention, redistribution, and crony capitalism. It’s going to take decades of elections to replace politicians who have this mindset with people who understand free markets and liberty. Inch by inch.

Sanders, Trump, and John Maynard Keynes, by Hunter Lewis, Sanders thinks our current Keynesian crony capitalist system is capitalism. Trump thinks our current Keynesian crony capitalist system is socialism. Their cure is more government intervention in different ways. Sanders wants redistribution of wealth, and Trump wants a mercantilist attitude about trade.

Donald Trump’s Contempt For The Free Market, at Trump wants to stop Ford from building an auto plant in Mexico by putting a tariff on the goods Ford will bring in from Mexico. Government regulations and taxes incentivized Ford to move the plant. So instead of using more Government force to create different incentives, why not get rid of the regulations and taxes that produced the original incentives?

My Letter To The NY Times re: My Advice To The ECB And The Fed, by Patrick Barron, at Excerpt from the article. “If the Fed wishes to prevent financial crises, it only needs to stop initiating them. The Fed’s hubris that it can fathom the proper interest rate for our vast and complex economy must rank among the greatest fallacies of all time. The Fed sees the world through the completely discredited Keynesian lens which posits that aggregate demand–what the rest of us know simply as spending–is the path to prosperity. Anyone who believes this nonsense need ask himself why he has not liquidated his own savings on frivolous consumption…

Global Stocks Soar On Surprise China Rate Cut, by David Gaffen, at Is anyone shocked that global stock markets soared when China’s central bank cut interest rates and the European central bank said they will increase the size of its quantitative easing (electronically printing counterfeit money) program? How strong is the world economy when the central banks of China, Europe, and the U.S. have to lower interest rates and print money to keep it afloat?

The Cronies: Half Of All Export-Import Bank Benefits Go To 10 Companies, at The Exim Bank, backed by your tax dollars, finances transactions so foreign customers can buy from American companies. These are transactions that private banks wouldn’t make because of the commercial and political risks inherent in these deals. It’s easier to be risky when it isn’t your money. By the way, does this seem like a money laundering scheme?

A Tax I Can Support, by Per Byland, at This just might work. Unfortunately politicians would never pass it.

Justin Trudeau Elected Canada’s Prime Minister; Young Liberal Star Compared To Obama, at How could this happen? Were Canadian citizens not aware of what has been going on South of their border over the last seven years? Oh wait! What about this article? Obama Campaign Team Hands Canada Over To Lib-Left, at

Is The New Higher Seattle Minimum Wage Destroying Restaurant Jobs In Seattle? at The answer is yes. Because the law of supply and demand states: Less is demanded at a higher price. This includes labor.

Actors In Los Angeles File Lawsuit Against Actors’ Equity Over Wage Hike, at I guess a minimum wage increase is only cool when it doesn’t affect you.

Michigan Governor Signs Bills Reforming Civil Asset Forfeiture, Some good news for liberty.

Rhonda Rousey Shuts Down Feminist.

There’s a difference between merit and value. You don’t get payed for how hard you work. You get paid for the value you produce. Who works harder; a man with a shovel digging a ditch, or a man on a backhoe digging a ditch? It doesn’t matter. The real question is; who produces the most value?


Central Planners Hate Economics

August 26, 2015

F A Hayek

F.A. HAYEK The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.


Politicians get voted into office because they promise to use the power of government to ‘do something’ to fix fake ‘crises’. They try to blame the unfettered free market for every inequality or unmet need found in society. Politicians blame economics because it is an easy target since most people don’t understand basic principles of economics.

Economic reality puts a limit on the unlimited designs of planners. The first law of economics, scarcity, especially the scarcity of knowledge, sees to it that everything has limits. Economic laws don’t limit the planners plans. Economic laws reveal the reasons the plans won’t work but they don’t create the underlying economic reality.

Ludwig von Mises

LUDWIG VON MISES  – “Economic history is a long record of Government policies that failed because they were designed with a bold disregard for the laws of economics.”

Planners have charged their central banks to do away with scarcity by using electronically printed counterfeit money. It sounds plausible on the surface if you look at ‘that which is seen’. But we all know from reading Bastiat that ‘that which is not seen’ is more important. The unintended consequences of Central Bankers policies, of money printing and zero percent interest rates, are playing out right now for all to see. Wasted resources and capital consumption are two of these results.

F. A. Hayek – “It has already been suggested that it is not necessary for the working of this system (free market capitalism) that anybody should understand it. But people are not likely to let it work if they do not understand it.

Central planners condemn free market capitalism because it doesn’t produce perfect results, (which means it doesn’t produce their desired result). Free market capitalism is the best system for allowing individuals the freedom to pursue their desires. This individual freedom has lifted the masses of people to a higher standard of living. Is it perfect? Nothing that man does is perfect. It is the responsibility of each voter to understand basic economic principles in order to protect the free market from the planners who want to destroy it. Start now because your individual freedom to pursue your interests in a free market is under siege.


LUDWIG VON MISES  – “Many think that governments are free to achieve all they aim at without being restrained by an inexorable regularity in the sequence of economic phenomena….they maintain that the state is God.”

These quotes by Hayek and Mises came to mind as I was reading an article titled, Economics Is Dead, And It Is Being Killed Again, by Per Bylund, at here are some excerpts from the article.

“You have to applaud the anti-economics left for this rhetorical masterpiece. They have struggled for decades to sink the ship of economics, the generally acclaimed science that has firmly stood in the way of their anti-market and egalitarian policies, hindered the growth of big government, and raised obstacles to enact everything else that is beautiful to the anti-economics left. The financial crisis is exactly the excuse the Left has been waiting for. It is a slam dunk: government grows, Keynesianism is revived, and economics is made the culprit for all our troubles.”

“If this weren’t so serious, it would be amusing that the failure of Keynesian macro-economics (whether it is formally Keynes’s theory or post-Keynesian, new Keynesian, neo-Keynesian, monetarist, etc.) is taken as an excuse to do away with sound micro-economic theory to be replaced with Keynesian and other anti-market ideas. But it is not amusing. If most of the discussions heard are to be believed, the failures of central planning is a reason for central planning, just like socialism is a reason for socialism. The success of the market, on the other hand, is not a reason for the market.”

“…. the Left hates all that is economics. Because it points out that creating a better world through central planning, money-printing, and political manipulation is indeed impossible. The market is neither perfect nor efficient, but it is better than any available alternative. In fact, the unhampered market is the only positive-sum means available for human society. The market is indeed the only way of progress; all else is a step backward.

Related ArticleCapital Consumption aka. Eating Our Seed Corn, at

Related ArticleWe’re All Born In The Middle Of The Story, at

Related ArticlePolitician’s “Affordable” Ideas Must Obey Economic Forces, at


Printing Money Doesn’t Equal More Savings

February 17, 2015

In this article titled, You Can’t Create More Savings By Printing More Money, Frank Shostak ( shows us that what you produce is actually what you can consume or exchange for something that you haven’t produced but want to consume. What you don’t consume or exchange is what you save. Savings is real production. Money is what we use to make the exchange process easier. Money is how we figure out exchange ratios between goods and services. Exchange ratios represented by prices in money is how 1 gallon of gas costing 2$ can be exchanged for two 1$ candy bars, or four 50 cent news papers, without ever exchanging the actual goods. Printing money isn’t the creation of any good of service. It is the creation of the demand for a good or service that is not backed by actual production. Printing money is theft.

Here are some excerpts from the article.

“Savings has nothing to do with money. For instance, if a baker produces ten loaves of bread and consumes one loaf, his savings is nine loaves of bread. In other words, the “savings” in this case is the baker’s real income (his production of bread) minus the amount of bread that the baker consumed.”

“When a baker sells his bread for money to a shoemaker, he has supplied the shoemaker with his saved, unconsumed bread. The supplied bread sustains the shoemaker and allows him to continue making shoes. Note that the money received by the baker is fully backed by his unconsumed production of bread.”

“Money can be seen as a receipt, as it were, given to producers of final goods and services that are ready for human consumption. Thus when a baker exchanges his money for apples, the baker has already paid for them with the bread produced and saved prior to this exchange. Money therefore is the baker’s claim on real savings. It is not, however, savings.”

“The printing of money therefore cannot result in more savings as suggested by mainstream economists, but rather to its redistribution”

“…. savings is not about money as such, but about final goods and services that support various individuals that are engaged in various stages of production. It is not money that funds economic activity but the flow of final consumer goods and services. The existence of money only facilitates the flow of the real stuff.”

Related ArticleWhat Comes First, Production or Consumption, at

Related ArticleCapital Consumption, aka Eating Our Seed Corn, by

Related ArticleDoes The Supply Of Money Have To Increase To Accommodate Increasing Production, by